New German management giant is in the making

Chartering strategy to be hammered out as alliance between Leonhardt & Blumberg and Buss Shipping aims to increase market visibility and improve relations with the banks

The management of newly created Leonhardt & Blumberg Shipmanagement is expected to begin talks after Easter to formulate a new chartering strategy.

What happens will depend on decisions of a third party, Reederei F Laeisz, which pools the commercial operation of its containership fleet with those of Leonhardt & Blumberg Reederei (L&B).

The chartering of the L&B/Laeisz fleet is handled exclusively by Martini Chartering, a Hamburg shipbroker that controls around 50 containerships from handysize up to baby-panamax.

Buss Shipping, on the other hand, uses its own shipbroking operation, Walther Moller & Co, which controls 26 vessels from 700 teu up to 2,800 teu.

The creation of a larger chartering unit, involving the three owners and their two shipbroking desks, appears to be a possible solution but it seems to be one of a number of options on the table.

Since the merger was unveiled on 12 April, the management of the new entity has received a few calls inviting it to participate in something even bigger, says Buss Shipping managing director Torben Kolln.

“We know that we have seen so much consolidation on the liner side that we need to do also on the owning side here in Germany,” Kolln said. “But to find the right partner is very difficult because you don’t know how they are financed or how stable their cash flows on the vessels are, and so on.”

L&B managing director Christian Rychly adds that formation of a larger player will provide more opportunities in charter and financial markets, even if it will not improve charter rates.

“Just because you operate a few more ships is not going to help you to increase charter rates,” Rychly said. “What we hope for is more visibility in the market."

He believes banks no longer wish to finance owners with fewer than five or 10 ships due to regulatory changes.

“We are living at a time when banks tend to support larger entities,” he said.

That is paying off for the merged entity, which already has received positive feedback from its financing banks, Kolln says.

He adds that lenders have communicated to the managers that they will consider the newly merged shipmanagement outfit for “warehousing” vessels because it is one of the bigger entities.

Besides increasing “scale” of the operation — deemed necessary in an age when lines are consolidating — another motive for the merger is “quality", Rychly says.

“You need to make sure that the ships you are chartering are actually performing," he said. "There are lots of ships out there where maintenance has been neglected and a lot of owners whose ships cannot perform. So you have to choose wisely with whose ships you team up.”

Much of the poorly maintained ships are KG (limited partnership)-financed vessels, where the two companies have little exposure.

Buss Shipping is less than a decade old, while L&B has little in the way of legacy assets, with just four KG shipowning companies left in its fleet. The remainder of L&B’s fleet is split between owned tonnage or owned by mainly US institutional investors.